THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CANDY CROWLEY, HOST: In the words of Defense Secretary Leon Panetta, this has been a bad year for terrorists.

Today, the struggle against al Qaeda with former Vice President Dick Cheney and Liz Cheney, former State Department official, and with former CIA director Michael Hayden and the former ranking member of the House intelligence committee, Jane Harman.

Then restlessness with the Republican presidential field. Insights from Mississippi Governor Haley Barbour.

I'm Candy Crowley. And this is State of the Union.

Five months after U.S. Navy SEALs raided a house in Pakistan and killed Osama bin Laden, the CIA launched an armed drone into Yemen killing the intended target, famed terrorist recruiter and propagandist Anwar al Awlaki, an American.

Here to talk about the terrorist's bad years is former Vice President Dick Cheney and his daughter, Liz Cheney, chair of a national security advocacy group, Keep America Safe. Together they wrote "In My Time, A Personal and Political Memoir."

Thank you both for joining us. I want to start with the drone strike that took out the top propagandist, at least for al Qaeda in the Arabian Peninsula, perhaps took out the bombmaker for the same group Ibrahim Hassan al-Asiri and also took out Samir Khan. What's your reaction to that?

DICK CHENEY, FORMER U.S. VICE PRESIDENT: Well, I think it was a very good strike. I think it was justified. I think it is very effective use of our drone technology. Thing I'm waiting for is for the administration to go back and correct something they said two years ago when they criticized us for "overreacting" to the events of 9/11. They, in effect, said that we had walked away from our ideals, or taken policy contrary to our ideals when we had enhanced interrogation techniques.

Now they clearly had moved in the direction of taking robust action when they feel it is justified. I say in this case I think it was, but I think they need to go back and reconsider what the president said when he was in Cairo.

CROWLEY: I want your reaction as well, because of your group that you work with, but let me just clarify what you are talking about. This was an American -- actually two Americans were killed, two American terrorists that were associated with al Qaeda in the Arabian Peninsula that were killed without due process, clearly, without a court. So what you're saying is if they can do that, they owe us an apology for going after our -- what seem people called torture, what you called enhanced interrogation techniques. Is that what you're saying?

D. CHENEY: Exactly. He said in his Cairo speech for example that he had quote, "banned torture." Well, we were never torturing anybody in the first place, said we walked away from our basic fundamental ideals. Now that simply wasn't the case. That is to say what he said then was inaccurate especially in light of what they're now doing with respect to policy.

But I do think this was a good strike. I think the president ought to have that kind of authority to order that kind of strike, even when it involves and American citizen when there is clear evidence that he's part of al Qaeda, planning, cooperating and supporting attacks against the United States.

CROWLEY: Because this was what we knew him as was a propagandist. So basically what he said and what he did primarily over the internet, and we know he was connected, or at least largely inspirational to some of the attacks -- Fort Hoot, which was a deadly attack, Times Square bomber, the so-called underwear bomber, so you have no problem with the U.S. going overseas and killing an American in a foreign country. That doesn't bother you.

D. CHENEY: I think you've got to go through the process internally, making certain it's reviewed by the appropriate people in the Justice Department, that they take a good, careful look at it. But I think they did all of that in this case. And I think the president has all the authority he needs to order this kind of strike.

It is different between a law enforcement action and a war. And we are at war. We believe we are in war. We believe the war started when they killed 3,000 Americans on 9/11. And I think what we've seen is the administration, the Obama administration, has clearly reached the point where they've agreed they need to be tough and aggressive in defending the nation and using some of the same techniques that the Bush administration did. And they need, as I say, go back and reconsider some of the criticisms they offered about our policies over the past years.

CROWLEY: Liz, do you have any in your group, which is dedicated to keeping up the fight against terror and keeping America safe, does this sort of thing, the drone attacks -- and they've taken out some very high-profile terrorists with drones and with undercover operations. Has this president made us safer in your estimate?

LIZ CHENEY, FORMER STATE DEPARTMENT OFFICIAL: I think that, you know, each time the United States is successful at taking out somebody like al Awlaki, it is a very positive thing. I think it is a sign that the war continues, a sign that we've still got folks out there who are attempting to attack us. I think it is critically important. What concerns me is that the damage that this president has done, some of the damage that my father was speaking about just now, the extent to which when the president of the United States goes on to foreign soil, talks about the United States abandoning our values, says that we tortured people, when he's in Cairo, you know, the home of Mohamed Atta, the home of Amman al Zawahiri. When he does that, he does real damage to our standing in the world and that's the kind of standing that we need to exercise a leadership role which is more important now, frankly, than it's been in many, many years when you look at what's happening across the Arab world, for example.

America's got to be strong, we've got to have credibility, we have to show leadership. This president seems unwilling, frankly, to do all of those things.

CROWLEY: This smarts. You still are smarting from that -- from that criticism. In fact I've seen a lot of people that have described President Obama's approach to terrorism is pretty much along the lines of the Bush administration absent the enhanced interrogation techniques. Would you go along with that?

I mean could you now -- I want to read you something that you said. Now this was after the underwear bomber was read his Miranda Rights and you felt that they were treating him as a criminal as opposed to a war criminal, as opposed to being a prisoner of war.

And you said, we are at war. And when President Obama pretends that we aren't it makes us less safe. Why doesn't he want to admit we're at war? It doesn't fit with the view of the world he brought with him to the Oval Office.

Setting that aside, does it matter what he calls it if in fact he has been so -- he has killed -- the U.S., obviously with our intelligence services and our military, have killed dozens of top al Qaeda leaders quite successful. So can you -- can you now say that he has helped in this war on terror, that he is in fact putting the United States on the more winning side of the war on terror? Because he certainly has killed more than were killed in the Bush administration.

D. CHENEY: Right. But we developed the technique and the technology for it.

The problem you have is that sort of the tone that's set at the top. And on the one hand he wanted -- I assume for political reasons -- not to call it a war. Not to call it a war on terror.

CROWLEY: Yes, but does that matter? Because he's conducting a war, isn't he?

D. CHENEY: Well, he is conducting a war, but it matters a lot I think in terms of the rationalization you use, the kinds of weapons systems you choose to use. If it is a law enforcement action, there are going to be inhibitions in terms of how you operate. It can affect the people up and down the line. For example, they talked for a while about prosecuting the people in the CIA who carried out our policies on our watch. Now they backed off that, that's a good thing. That's the right direction to move in. But I think in terms of the kind of signals that are sent by the commander in chief with respect to the kind of efforts that are going to be used and what we expect our people to be able to do, he needs to be clear what he's doing and he clearly is fighting a war. It is important that he do that. I agree with the attacks. That's the right thing to do. But don't get wrapped up in your underwear then trying to go back and validate, if you will, some of the foolish things they said during course of their campaign.

CROWLEY: I guess what I'm asking is, isn't the proof in the pudding? Hasn't this administration waged a successful war against terror?

D. CHENEY: Yes. But, they need to call it what it is. When he goes to Cairo, and in effect says we walked away from our ideals, we forgot our core principles and core values on our watch, that's a big mistake. That sends a signal out there to the world where U.S. stature does matter, where our position in the world and our ability to influence events and make progress for example on Mideast peace turns very much on how people look at us.

If you've got the president of the United States out there saying we overreacted to 9/11 on our watch, that's not good.

CROWLEY: You'd like an apology, it sounds like.

D. CHENEY: Well, I would. I think that would be not for me, but I think for the Bush administration, and that he misspoke when he gave that speech in Cairo two years ago.

CROWLEY: You feel he wronged the Bush--

L. CHENEY: I think he did tremendous damage. I think he slandered the nation and I think he owes an apology to the American people. Those are the policies that kept us safe. They are the policies, frankly, that contributed the enhanced interrogation technique, we know now Leon Panetta has said some of the intelligence we gained through that program helped us identify the location of bin Laden. So I think the president owes everybody an apology, frankly.

CROWLEY: Liz Cheney, Dick Cheney. Stick with me. We will come back with more with Dick and Liz Cheney. We're going ask for instance their odds-on favorite on the Republican candidate that will go head- to-head with President Obama in 2012.

CROWLEY: We are back with former Vice President Dick Cheney and his daughter and co-author, Liz Cheney.

Before we move on to U.S. politics, when I was preparing for this, I talked to a lot of friends outside the business, saying, you know, what do you want to hear? Like what most still bothers you or what would you like to hear? And here's one of them. It was from an August 2002 VFW speech where you said: "simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction, there's no doubt he is amassing them to use against our friends, against our allies, and against us."

And the question from my friend was, what made you so positive at this time?

D. CHENEY: Intelligence reports that we were getting. The first intelligence report we got after we got elected was on weapons of mass destruction in Iraq. And it went all the way back to '98 in the Clinton administration. And there had been steady reporting from '98 on. Congress had passed a law authorizing $100 million to try to overthrow the government in Iraq. And we had 27 months of reporting after we got elected until we actually went into Iraq, all of which said he has got weapons of mass destruction.

Now it turned out what he -- he didn't have stockpiles. He did have the technology. He had the people with the know-how. He had the raw materials. He had the plans to go back into production once...

(CROSSTALK)

CROWLEY: But he didn't -- he hadn't amassed them. And I guess, you know, people say, that's why we went in and we were told they were there and then they weren't there. And did you regret making statements like that?

D. CHENEY: It wasn't anything we made up. The president and I didn't sit in the Oval Office on a Saturday morning and say, let's say he has got WMD. We were given repeatedly reports that said that he in fact had produced weapons of mass destruction.

CROWLEY: Shouldn't you have fired somebody for those reports?

D. CHENEY: Well, and we knew he had done it before.

CROWLEY: Right. D. CHENEY: But it was also true the Germans had the same intelligence, the Brits had the same intelligence. This wasn't just a U.S. problem. And in fact he did have -- talk to Charles Duelfer or David Kay, the guys who ran the Iraq Survey Group after the war, they said that they were more concerned about what they found than when they were worried about stockpiles because he clearly had retained the capacity to get back into the business.

CROWLEY: The other question that was asked, sort of along similar lines but it is about that August report. It was a daily report to the president that said "al Qaeda determined to launch attack against the U.S.," and a month later it happened.

Did you ever have a moment after 9/11 where you thought, did we miss something? Shouldn't we have known this? Why didn't we know this? Did anybody go back and try to figure out why the dots weren't connected or why more attention wasn't paid to that report? Did you ever regret not looking more carefully at stuff ahead of time?

D. CHENEY: We never had actionable intelligence. You could go back and look at that. And it just wasn't there. There were problems though. There had been a wall erected between sort of the domestic intelligence side of the business and the foreign side.

You talk to Mike Hayden, General Hayden is going to be here shortly. He said, for example, that if we had had the terrorist surveillance program set up which we set up right after 9/11, he was the prime architect of, that we might have been able to pick up on the two hijackers who were living in San Diego at that point and that might have triggered suspicions and led us to be able to intercept the operation.

So -- but that program didn't exist prior to 9/11.

CROWLEY: Abrupt change of pace here. President Obama last night spoke for the Human Rights Campaign, which is a pro-gay and lesbian organization for gay and lesbian rights, and he had this to say.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There are those who don't want to just stand in our way but want to turn the clock back, who want to return to the days when gay people couldn't serve their country openly, who reject the progress that we've made, who, as we speak, are looking to enshrine discrimination into state laws and constitutions, efforts that we've got to work hard to oppose because that's not what America should be about.

(END VIDEO CLIP)

CROWLEY: Also criticized the Republican field for allowing a gay soldier to be booed during -- when he openly said he was gay and he had a question for the Republican candidates. And some in the audience booed him and no one on stage said anything. Is the president on the right side of history on these issues dealing with gay and lesbian rights? D. CHENEY: Well, I think the decision that has been made with respect to allowing gays to serve openly in the military is a good one. I mean, it is the right thing to do. I'm a little bit leery of the notion that somehow we ought to go hammer the Republican candidates because they didn't respond to booing in the audience.

When you're in political campaign and debates, you know, people boo a lot of things. And I'm not sure that it was all focused specifically on that particular issue.

CROWLEY: But do you feel, Liz, that the Republicans need to move ahead with this particular issue because they are seen as anti-gay rights, anti-lesbian rights, and bisexual community, transgender community? Do you think this president is on the right path when it comes to equal rights?

L. CHENEY: You know, I think that it was the right decision to repeal "Don't Ask/Don't Tell." I don't know where President Obama is on this issue and I suspect that there were a lot of people who were watching his speech in that room last night wondering whether they could believe what he was saying, frankly. His position on these issues hasn't been that different from where many of the Republican candidates are. He hasn't come out and advocated gay marriage, for example. I think this was sort of one more example where he's trying to have it both ways.

When he speaks to that audience he tries to sound like he's, you know, some sort of a fighter and advocate for equality, but when he's trying to appeal to people who may not have that as their primary issue, he has got another position. I thought it was pretty vintage Obama, frankly.

CROWLEY: Where do you all stand on the 2012 group at this point? There is Rick Perry out there, Romney out there. Let's start with you.

L. CHENEY: You know, I haven't endorsed anyone yet. I do think -- you know, as I watched the last debate I felt good about the fact that our candidates clearly understand, for example, how important the private sector is going to be in getting us out of this economic mess we're in, something that this White House doesn't understand.

I think there's real hope on the horizon here. You know, there are a number of people we could nominate on our side, frankly, who would be much better -- probably all of them who would be much better than President Obama has been on the economy, for example. But I'm not backing anybody in particular at this point.

CROWLEY: Can you support anybody currently in the Republican field?

D. CHENEY: I will support the Republican nominee. I haven't endorsed anybody yet.

D. CHENEY: I've been busy writing and promoting my book, Candy, and watching with interest. I think the debates have been pretty good actually. And I think we've got a good crop of candidates there. We don't know that everybody who is going to get in is in yet. So I'm...

CROWLEY: Would you like to see Chris Christie run?

D. CHENEY: I'm not urging anybody to jump into that arena. I've been there myself and they're big boys, they can decide whether or not they want to run.

CROWLEY: Quick wrap-up question for both of you. We thought perhaps we'd see Liz Cheney running for office in this election cycle, either for U.S. senate from Virginia or a congressional seat. You still have thoughts that maybe one day you might run?

L. CHENEY: We'll see what happens. Right now I'm focused on hosting the sixth grade potluck dinner at my house and chaperoning field trips, but it is something that I have a lot of respect for people who do. And I may take a look at it down the road.

CROWLEY: But not this time around.

L. CHENEY: No, I'm not planning to run in 2012.

CROWLEY: And actually...

D. CHENEY: If she does run, I'll support her.

CROWLEY: You'll support her? That's good to know.

Two wrap-up questions for you. One is that President Bush wrote in his book that he worried that his refusal to pardon "Scooter" Libby, your former chief of staff which you pushed very hard for a pardon for him, he -- I mean he had been found guilty of four felony counts dealing with the Valerie Wilson case. President Bush worried that it would ruin your friendship. Did it?

D. CHENEY: Let's say it was a difficult moment. It put a real strain on the relationship. We worked together for eight years. He made me vice president of the United States. I'll always be very grateful for that. This is one issue where we had a fundamental difference. He got to make the decision and he did. I just basically disagreed with him.

CROWLEY: Did it ruin your friendship?

D. CHENEY: I can't say that. I wouldn't take it that far, by any means.

But Mr. Libby I think was innocent, didn't deserve to be indicted. I think -- it is a long story. I'd urge people to read that chapter in the book. But it really -- I think it was a miscarriage of justice.

CROWLEY: Heart transplant?

D. CHENEY: Don't know. I've got to decide. I'm on a heart pump now. I've got a piece of equipment inside me that supplements my heart. It works very well. I'm 14 months into the program and it's been functioning perfectly.

CROWLEY: It's good to see you, former Vice President Dick Cheney.

Liz Cheney, thank you as well.

L. CHENEY: Thanks, Candy. CROWLEY: And if you want to see the lighter side of the Cheneys, you can watch my "Getting to Know" interview with them and many other newsmakers on our web site, cnn.com/sotu.

Up next, two intelligence experts on what Anwar al Awlaki's death means for al Qaeda.

(COMMERCIAL BREAK)

CROWLEY: Joining me here in Washington, retired General Michael Hayden, former director of the CIA, now a principal for the Chertoff Group, and Jane Harman, former ranking member of the House intelligence committee, who is now president and CEO of the Wilson Center.

Familiar faces. Thank you both for coming back to talk about what looks like a pretty big week in the war against terror. Not only did Anwar al Awlaki who was jut an internet recruiter for a number of plots that took place in the U.S. over the past couple of years, but also Samir Khan, another American. And we'll get to that in a minute. Who was a propagandist. And it may be that bombmaker, Ibrihim Hassan al-Asiri was also taken out.

Then we find out one of the chief commanders in the Haqqani Network has been captured by NATO an Afghan forces.

So let's start with al Awlaki. Is this a psychological blow to al Qaeda in the Arabian Peninsula, or is it an operational blow?

FORMER REP. JANE HARMAN (D), CALIFORNIA: I think it is both. I think AQAP, al Qaeda in the Arabian Peninsula, had emerged as the more potent al Qaeda faction in terms of mounting attacks against us, even though al Awlaki was not the titular head of AQAP in terms of his external reach into the United States, the fact that he harbored two of the 9/11 terrorists and knew others, and that he helped with plots like the Hasan plot to kill 13 at a recruiting station in Texas and the Shahzad plot in New York and -- and that recruited, or at least was involved with Abdulmutallab, the underwear bomber and he was involved with the parcel bomb plot, all of those things make him operationally capable and highly sophisticated. And add to that Samir Khan who produced the magazine that was radicalizing the number of disaffected youth in the United States to become home-grown terrorists, and add to that if its true the bombmaker, who is a Saudi national, al Asiri, who was enormously capable. This is a trifecta that I think has enormous reach in terms of reducing -- degrading the capability of al Qaeda to attack us.

CROWLEY: It is huge, but let's talk about the manner in which they died which is a drone attack, because the president has almost quadrupled the number of drone attacks, especially into Pakistan, that the Bush administration launched and been quite successful. They have wiped out -- not just with drone attacks but in other ways, a lot of top terrorists.

Do you worry that these drone attacks, because they take out innocent people -- they didn't to as far as we know in this last attack, but they often take out innocent people, they miss their targets and they upset the local population. Pakistan comes to mind. Does that worry you?

GEN. MICHAEL HAYDEN (RET.), FORMER CIA DIRECTOR: Well first of all, I would challenge a bit the premise of the question about collateral damage and killing innocents. That's much overblown without getting into any operational details. We obviously can't confirm or deny.

CROWLEY: Doesn't happen?

HAYDEN: No. No. Never say never, but I do think there are some audiences out there who greatly exaggerate what we call collateral damage.

This has proven to be a wonderful weapon in this war. Two successive presidents have used it. It has probably been the single most impactful thing we have done to cripple al Qaeda. We've crippled al Qaeda main to a point now that most people think they're almost not capable of attacking the American homeland and now we've shifted over here to Yemen.

And if I could just add to a thought to what the congresswoman said, think about al Awlaki in terms of the near and far enemy. He was the part of al Qaeda in the Arabian Peninsula that motivated them and enabled them to go after the far enemy, that's us. And so in that sense his death makes America much more safe.

HAYDEN: Frankly, though, Candy, it has less of a direct impact on the fate or health of al Qaeda in the Arabian peninsula. In fact with his being gone, they may be even more focused against the "near enemy," and that's Yemen and Saudi Arabia.

CROWLEY: So that sort of brings me to my next question, which is that we're now hearing this sort of al Qaeda is nearing an end. We've, you know, taken out a lot of their top leadership. How close are we to defeating al Qaeda and how will we know when that happens?

HARMAN: Well, there's not going to be a white flag anywhere, just as there really isn't one or even five battlefields. I don't call this -- and I think it was a misnomer -- I disagree with Vice President Cheney when he said it earlier, I've never called this a "war on terror." Terror is a tactic.

But this is a challenge from those who have extreme views, not all of whom are Muslim, that we have to defeat. We can defeat part of it kinetically. Drone strikes are a kinetic tool in our arsenal. But we really have to win the argument. And our counter-narrative needs to be much stronger and much better in order to win this argument in the 21 or 25 countries in which al Qaeda is.

Let me just say one thing about drone strikes. I think -- I support them as a tool, but we have to be very careful how we use them. We do use them carefully, as in my prior life on the House Intelligence Committee, I was briefed on rules of engagement. And, again, we don't officially acknowledge this program but let's just say the program is used very carefully.

We could abuse this program. We don't abuse it, but we've got to have a counter-narrative, we've got to live our values, we've got to do other things, diplomacy and development in these countries in order to persuade the next generation not to strap on suicide belts.

CROWLEY: General Hayden, let me -- I'll get you in on this, but I've got to take a quick break. And after the break, more with our panel, including analysis of the delicate relationship between Pakistan and the U.S.

(COMMERCIAL BREAK)

CROWLEY: We are back with retired General Michael Hayden and former Congresswoman Jane Harman.

General, to you. Vice President Cheney essentially said in his interview earlier, listen, I am all for these drone attacks, I am really glad they got these people, but for an administration to kill two Americans in Yemen without benefit of a trial or any kind of due process, to criticize us for the enhanced interrogation techniques is completely hypocritical.

I want to get first your reaction to the killing by the United States government of two Americans and whether you think the vice president has a point.

HAYDEN: Well, what I would say is what happened in Yemen two days ago is a natural and lawful outgrowth of a premise we've accepted as a nation. We are a nation at war. We are at war with al Qaeda and its affiliates.

Two successive presidents, the Congress and the American courts have all recognized the legitimacy of that. And if you accept that premise, and not everyone in America does, and not everyone...

(CROSSTALK)

CROWLEY: We are not at war with Yemen.

HAYDEN: No, no. But we didn't attack Yemen. We attacked an enemy who was in Yemen beyond the reach of Yemeni sovereignty or American law enforcement. And that premise, we are nation at war, and as a belligerent, have a right to kill or capture enemy combatants, trumps the fact that one or another of those combatants might have U.S. personhood wrapped around them.

So I'm quite comfortable with it.

CROWLEY: Does the vice president have a point though that -- and he agrees with President Obama on the drones. He agrees that this strike should have happened, but does he not have a point that the Bush administration was criticized as having un-American values for enhanced interrogation techniques, and this administration kills Americans without due process, and that he finds an equivalency there? HARMAN: Well, I dispute a lot of what he said as well. First of all, the targeted killing of anyone should give us pause, and there has to be a legal framework around doing that. I believe in this case...

(CROSSTALK)

CROWLEY: ... legal framework.

HARMAN: Well, the reports -- fresh reports say, there is a lengthy memo that the Office of Legal Counsel and the Department of Justice has prepared making the case. I believe there is a good case. Imminent threat, beyond our ability to arrest him, the authorization to use military force against al Qaeda, he was complicit with al Qaeda. There's no question about that. And a couple of other grounds.

But I think the Justice Department should release that memo. I remember my time as ranking member on the Intelligence Committee, begging the Bush administration to release the memoranda, which we finally did see, the John Yoo memos, initially, which I -- most people felt initially were faulty -- on faulty legal grounds, but nonetheless we finally saw those memos.

So I think Vice President Cheney has a rather thin skin for a guy who has been in the partisan wars as long as he has. And I think some of the criticism of Bush secrecy is valid. I don't think the Obama administration should be repeating it.

I do applaud the fact that they have continued an aggressive counter-terrorism strategy. I'm for that. But I think the debate about the legal grounds for that strategy should be more in the open and we should have a legal framework around our interrogation and detention policies far more than we do right now.

CROWLEY: Let me turn you, in our last couple of minutes, to Pakistan. We saw Admiral Mullen, who was still the chairman of the Joint Chiefs of Staff at that time, he is no longer, having retired this week, who said that the intelligence arm of the Pakistani government is a veritable arm of the Haqqani network, which most recently has been lobbing missiles at the U.S. embassy in Kabul.

How long does this stay tenable that we are partners with a country in the fight against terrorism and they have an intelligence mechanism that is working with a veritable arm of the very people who are attacking us? It is just backwards, isn't it?

HAYDEN: Oh, it is. And I've got no good solution but I also wouldn't quibble with the words that the chairman used. I've seen examples of that during my time in government and it clearly apparently has continued since I've left government.

So I would not challenge that premise.

CROWLEY: And, quickly, should we just at least stop giving them billions of dollars a year? HARMAN: Well, it is a very complicated relationship. Pakistan has 100 nukes. It's a huge Muslim democracy, right in the bull's eye of problems that we have. I want to applaud Admiral Mullen for another thing, which is his courageous comments about ending Don't Ask/Don't Tell. I think of all the military voices his was singular and I think that policy ended much faster because he was the guy who pointed out the hypocrisy of that policy.

CROWLEY: But in the end what you are saying is we have to stay friends with Pakistan, because they've got nukes and they've got all those terrorists at least in the mountainous range.

HAYDEN: Let me -- let me put this in two phases perhaps. Over the long-term, of course we have to stay friends with Pakistan. Pakistan is not an enemy of the United States. And we have strategic reasons to remain friends.

But achieving our objectives in south Asia through Pakistan may not be tactically possible in the near term. So we might want to concentrate on the depth of the longer term relationship and recognize that there are some things they will not do. And we have to make conclusions based on that.

CROWLEY: General Hayden, Congresswoman Harman, I have to stop you there. I'm so sorry, but please come back, there's always fun stuff to discuss.

Up next, top stories.

And then Mississippi Governor Haley Barbour on the 2012 field.

But first Fareed Zakaria on his program coming up at the top of the hour.

FAREED ZAKARIA, HOST FAREED ZAKARIA GPS: We have a really important show today on GPS. We look at what to do about America's more vex foreign policy issue, relations with Pakistan. I sat down with Admiral Mike Mullen in his last days in office as chairman of the Joint Chiefs of Staff. He stands by his comment that the deadly Haqqani group in the Af-Pak region is a veritable arm of the Pakistani military.

We also have the other side of the story. I'll speak with Pakistan's new foreign minister Hina Rabbani Khar coming up later on GPS.

(COMMERCIAL BREAK)

CROWLEY: Time for a check of today's top stories.

President Obama told a gathering of gay and lesbian activists that he's committed to equality. In his speech to the Human Rights Campaign last night, the president criticized his Republican rivals for their reaction to the booing of a question by a gay soldier.

(BEGIN VIDEO CLIP) OBAMA: We don't believe in the kind of smallness that says it's OK for a stage full of political leaders, one of whom could end up being the president of the United States, being silent when an American soldier is booed. We don't believe in that.

(END VIDEO CLIP)

CROWLEY: The booing occurred during a Republican presidential debate last month in Orlando. The candidate to whom the soldier's question was directed, Rick Santorum, said he didn't hear the boos and would have condemned them if he had.

The Yemeni government airplane mistakenly bombed its own troops killing 29 soldiers. The incident occurred last night in a province in southern Yemen where government forces have been battling Islamic militants. The soldiers were using a school as a launching pad to strike at militants when they were bombed.

Israeli prime minister Benjamin Netanyahu's government said today it supports the Middle East quartet's call for the resumption of direct talks with the Palestinians within the next month. Israel called on the Palestinian Authority to do the same. Top Palestinian officials dismiss the Israeli move saying there can be no further negotiations until Israel halts all settlement construction.

And those are today's top stories.

The bad economy continues to be bad news for the president. Republicans note, when the president goes out to sell his jobs program, it is to states he won in 2008 and where he falters now. In Ohio, only 43 percent of voters say the president should be re-elected and President Obama is running virtually even there with Romney. And virtually even with Perry.

Still, polls can cut both ways. Asked who is more likely to create new jobs, Americans say Democrats. And while Republicans are against new taxes, the public by a large margin supports new taxes on those making over $250,000 a year.

It also supports higher taxes on corporations.

Dissecting the polls and the politicians next with Mississippi Governor Haley Barbour.

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CROWLEY: Joining me from Jackson, Mississippi, Republican Governor Haley Barbour, who's not just a governor but a pretty darn good political analyst. So put that hat on for us today as we take a look at the Republican field.

Do you buy into the theory that all of the hubbub surrounding, oh, let's get Chris Christie into the race is a reflection of Republican dissatisfaction with the current field?

GOV. HALEY BARBOUR (R), MISSISSIPPI: Well, I really don't. I think it's a token of the -- the regard that people have for Chris Christie. He's a great governor. If he were to get into the race, he'd have an immediate following. I have no idea as to whether or not he's going to get into the race. But, no, I think this is more an effect of people liking Christie.

CROWLEY: Have you spoken to him at all about this?

BARBOUR: Not in weeks. And I don't have any information, Candy, that you don't have. There's certainly a huge amount of speculation, but I have no -- I have no idea what he's going to do.

CROWLEY: You know, when you do poll Republicans, we do tend to turn up a lot of dissatisfaction, which is not unusual before a party actually selects somebody. But we saw Rick Perry come in, and it was -- you know, almost immediately became the front-runner in the polls. And then along came the debate over immigration and his feeling that in-state tuition breaks should be given to the children of undocumented workers.

Do you think that that has affected him to the extent that it has really lessened his chances to become the Republican nominee in a party that is very much against that sort of thing?

BARBOUR: You know, the news media wants the primaries to be decided this week. There's too many people in the news media who think whatever happened in the last 24 hours tells us what's going to happen the next 24 weeks.

The fact of the matter is 90 percent of what matters for winning the nomination is still in front of us. And, you know, when I grew up in politics, we used to say today's headlines are tomorrow's fish wrappers. Well, they don't sell enough newspapers anymore for people to understand what that means. But, you know, people should not get up on the news of the day or the news of the hour is necessarily going to have some big impact down the road. And a nomination contest is a ways from now.

CROWLEY: I agree with you...

BARBOUR: You know, Candy, I would remind you, in September four years ago, Rudy Giuliani led in our polls, and Fred Thompson was second. So...

CROWLEY: It is...

BARBOUR: ... we have to be careful...

CROWLEY: ... completely -- the calendar is certainly a cautionary note. I give you that. But you and I know that sometimes candidates get in, and you can spot a fatal flaw from a mile away, saying this is never going to work this year, wrong person, wrong time.

And so I guess what I'm asking you is whether you think that Rick Perry's, certainly among conservatives in his party, that he has a fatal flaw in his position on in-state tuition for the children of undocumented workers?

BARBOUR: Well, I really don't. I am reminded about looking for fatal flaws. You could name three fatal flaws that Jimmy Carter had in 1975 or that Bill Clinton had in 1991.

The fact of the matter is the Democrats were dying to run against Ronald Reagan in 1980 because they saw all these fatal flaws. The public -- Republicans or Democrats in the general election -- the public's going to look at our candidates in the totality. They're going to look at their judgment, at their record, and they're going to compare it to Barack Obama.

At the end of the day, the election next year will be a referendum on the presidency of Barack Obama, on his record, his policies, and the results they have achieved or not achieved. I don't think any of our candidates have a, quote, "fatal flaw." But certainly none of them is perfect.

CROWLEY: Let me -- let me, sort of, pick up on that. And as you know, the Obama re-election campaign will very much want to make this an election not a referendum on him or on his policies but on a choice between a Republican candidate and the president, and they're banking that the president will win on that, looking at the current field.

Why? Because they believe that the American public will see the Republican that comes out of this field as too conservative for their taste.

And along those lines, I want to ask you, when you saw the candidates asked the question, if you were offered a 10-1 deal, that is that there would be $10 of spending cut for every $1 in tax increases, and no candidate would accept that deal, does that suggest to you that there is no room for compromise in the Republican Party?

And would you have raised your hand on that question?

BARBOUR: Well, first of all, Candy, one thing you and I both agree on is President Obama can't run on his record, that he's got to try to make this election about the Republican, and they will try to do anything they can do to disqualify him or her or make them unacceptable. You're right about that. Obama's people know they can't run on their record.

On that question, you know, I have a little different view. I was a political director for Ronald Reagan. We had to compromise on everything. We had a Democratic House of Representatives every minute that Ronald Reagan was president. But we did the Reagan economic plan, had to compromise, didn't get everything we wanted. We did 1986 tax reform...

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CROWLEY: Does it worry you that you've got a Republican field that doesn't look like they want to compromise on anything?

I mean, $10 in spending decreases as opposed to $1 in tax increases is a pretty darn good deal. And none of them, you know, went for it.

BARBOUR: Well, Candy, I don't feel bad about having a Republican field that knows better than to negotiate against yourself with the news media.

Now I suspect, if you got down into a room where you were actually negotiating how that you're going to try to get this country's economy out of the terrible shape it's in right now and get some Americans back to work because unemployment is so high, in the reality of that, yeah, I think there would be a lot more compromise than you see when the news media says, well, stake out your position so the Democrats can, or your opponents can throw rocks at it.

You know, I am somebody that -- I had a Democratic legislature for seven years. And so I never got everything I wanted, and I don't think these guys think they'll get everything they wanted. But you shouldn't bid against yourself for the -- for the benefit of the news media.

CROWLEY: I spoke with Senator Lindsey Graham not too long ago on this program. And one of the things he said was he believes that the presidency -- speaking of Republicans -- the presidency, he said, is "ours to lose."

Do you agree with that assessment?

BARBOUR: Well, I actually think that the incumbent is always the favorite. President Obama has some terrible weaknesses you were just talking about, 43 percent re-elect in Ohio, a state that he must win in order to get re-elected. The economy is terrible, and the American people understand that the -- the weak economy and the failure to create jobs is because of Obama's policies. It's not in spite of his policies.

They know that his calling for huge tax increases on employers makes it harder for people to get hired. When you don't know what you're going to have to pay or what your obligation's going to be for your employees' health insurance, how do you hire more people?

So I don't agree that we are the favorite. I think the president's the favorite, but he can't run on his record. If this is a referendum on Obama's policies, results...

CROWLEY: Sorry...

BARBOUR: ... he'll lose.

CROWLEY: Sorry to cut you off here, but, Governor, thank you so much for your time. We appreciate it.

BARBOUR: Thank you.

CROWLEY: Thank you all for watching "State of the Union." I'm Candy Crowley in Washington.